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DECISION No. 271/2003/QD-TTg OF DECEMBER 31, 2003 PROMULGATING THE REGULATION ON SUPERVISION AND EVALUATION OF THE OPERATIONAL EFFICIENCY OF STATE ENTERPRISES

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to November 26, 2003 Law No. 14/2003/QH11 on State Enterprises;

Pursuant to June 12, 1999 Law No. 13/1999/QH10 on Enterprises;

At the proposal of the Minister of Finance,

DECIDES:

Article 1.- To promulgate together with this Decision the Regulation on supervision and evaluation of the operational efficiency of State enterprises.

Article 2.- This Decision takes effect 15 days after its publication in the Official Gazette.

Article 3.- The Finance Minister shall assume the prime responsibility for, together with the concerned ministries and branches, guiding the Regulation promulgated herewith.

The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies, the presidents of the provincial/municipal People's Committees, the chairmen of the managing boards, the general directors or directors of the State enterprises shall have to implement this Decision.

Prime Minister
PHAN VAN KHAI

REGULATION ON SUPERVISION AND EVALUATION OF THE OPERATIONAL EFFICIENCY OF STATE ENTERPRISES

(Promulgated together with the Prime Minister's Decision No. 271/2003/QD-TTg of December 31, 2003)

I. GENERAL PROVISIONS

Article 1.- Purposes of the supervision and evaluation of the operational efficiency of State enterprises

1. The supervision of State enterprises (hereinafter referred to as enterprises) aims to grasp in time the actual situation and efficiency of the operation of enterprises in order to help them solve their problems, fulfil their business objectives and plans as well as public-utility tasks, raise their production and business efficiency and competitiveness; and concurrently to contribute to perfecting mechanisms, policies and laws.

2. The evaluation of the operational efficiency of enterprises aims to classify enterprises and work out measures to spiritually and materially encourage enterprises which operate profitably as well as their managers and executives; to handle in time enterprises which operate poorly as well as their managers and executives.

Article 2.- Bases for supervising, and evaluating the operational efficiency of, enterprises

1. Supervision of enterprises shall be conducted in accordance with this Regulation and other relevant law provisions.

2. Evaluation of the operational efficiency of enterprises shall be conducted according to the criteria set forth in this Regulation.

Article 3.- Objects of supervision and evaluation of the operational efficiency of enterprises

1. State companies;

2. State-run joint-stock companies

3. Joint-stock companies where the State holds dominant shares or contributed capital;

4. State-run one-member limited liability companies;

5. State-run limited liability companies with two or more members.

Enterprises operating in the financial, banking or insurance domains shall not be governed by this Regulation.

Article 4.- Interpretation of terms

1. "Supervision of enterprises" means the monitoring and examination of enterprises in their business activities, public-utility activities and observance of policies and laws.

2. "Evaluation of the operational efficiency of enterprises" means the use of criteria for determining the operational efficiency of, and classifying, enterprises.

3. "Evaluation criteria" mean the system of criteria and standards used for determining the operational efficiency of, and classifying, enterprises in a comprehensive and objective manner.

II. SUPERVISION OF ENTERPRISES

Article 5.- Self-supervision by enterprises

1. Self-supervisors

Self-supervisors within the enterprises are managers, executives and laborers of the enterprises. For supervision, these subjects shall use internal auditors as well as professional sections of the enterprises, people's inspectors, trade union organizations and workers' and employees' congresses. The enterprises' internal supervision shall comply with the provisions of the Law on State Enterprises, the Law on Enterprises, the Regulation on financial management of enterprises, the Regulation on exercise of democracy at enterprises, the Regulation on internal audit, the enterprises' charters and other legal documents.

2. Purposes of supervision

The enterprises shall supervise by themselves developments in their activities so as to detect in time problems and difficulties and preclude violations and risks in their production and business; to make management and executive decisions, work out remedial measures, or propose their owners or functional State agencies to decide on matters falling beyond their competence.

3. Contents of supervision

a/ Supervising the mobilization, use and distribution of the enterprises' resources, including assets, commodity supplies, capital money, labor, turnover, profits, distribution of production and business results, and other resources in the enterprises' operating process;

b/ Supervising the recruitment and employment of laborers and the payment of their wages; the use of the reward, welfare and job-loss allowance reserve funds, and other interests of laborers;

c/ Checking the reliability of data in financial statements, other statements and economic-financial information according to current regulations. Detecting problems and weaknesses in the enterprises' operation management and execution systems;

d/ Supervising the observance of law provisions; resolutions and decisions of the enterprises' owners, managers and executives. Evaluating the validity and effectiveness of resolutions and decisions of the enterprises' managers and executives and the effectiveness of the managerial and executive activities of such persons; the operational capability and efficiency of the enterprises' managerial, production and business sections; the enterprises' operational efficiency.

Article 6.- Supervision by owners

1. Supervisors

a/ For State companies and State-run one-member limited liability companies:

Organizations decentralized or authorized by the State to act as owners of the enterprises shall supervise, and evaluate the operational efficiency of, the enterprises according to their respective functions, tasks and powers. Specifically:

- The managing boards of State corporations and parent companies shall perform their function of supervising according to the contents specified in Clause 3 of this Article their attached State-run one-member limited liability companies and independent cost-accounting member companies;

- The provincial/municipal People's Committees shall perform the function of supervising according to the contents specified in Clause 3 of this Article their attached corporations and independent State companies;

The ministries and central agencies shall perform the function of supervising according to the contents specified at Points a, b and c, Clause 3 of this Article the State corporations and independent State companies set up under the Prime Minister's decisions or their own decisions.

Particularly for State-run one-member limited liability companies with their owners' representatives being ministries or central agencies, they shall be supervised according to the contents specified in Clause 3 of this Article.

- The Ministry of Finance shall perform the function of supervising according to the contents specified at Point d, Clause 3 of this Article the State corporations and independent enterprises set up under decisions of the Prime Minister or of the ministries or central agencies.

b/ For other State enterprises prescribed by the Law on State enterprises:

The capital-contributing members or shareholders shall perform the owner's function of supervision according to the contents specified in Clause 3 of this Article, the provisions of the Law on Enterprises, and the enterprises' charters.

2. Purposes of supervision

Owners shall supervise regularly and systematically the enterprises' activities and financial management so as to grasp in time all of their advantages, difficulties and problems, and work out solutions thereto, raise the enterprises' competitiveness and capital use efficiency.

3. Contents of supervision

a/ The organization of business activities and the performance of tasks by the enterprises' managerial or executive apparatuses;

b/ The realization of the enterprises' annual and long-term production and business objectives, strategies and plans;

c/ The execution of the owners' and managing boards' resolutions and decisions, the enterprises' charters. Evaluating the effectiveness of the owners' resolutions and decisions related to their rights over the enterprises' operations;

d/ The enterprises' business results, capital use efficiency and debt payment capabilities.

Article 7.- Supervision by State management agencies

1. Supervisors

The ministries, central agencies and provincial/municipal People's Committees shall supervise enterprises according to their respective State management tasks and functions, avoiding overlapping or troubles caused to enterprises' operations.

2. Purposes of supervision

The State management agencies shall supervise enterprises in order to detect and handle in time problems, mistakes and violations in their observance of the State's undertakings, policies and laws; and at the same time to amend, supplement the State's undertakings, policies and laws and/or propose competent State agencies to amend and supplement them.

3. Contents of supervision

Supervising the implementation of the State's undertakings, policies and laws by the enterprises and evaluating according to their respective functions and tasks the enterprises' operation situation and efficiency.

Article 8.- Forms of enterprise supervision

1. Supervision within the enterprises, which means internal supervision conducted by the enterprises themselves.

2. External supervision, which means supervision conducted by the owners and State management agencies in the following two forms:

a/ Indirect supervision, which means the monitoring and examination of the enterprises' operations through their financial, statistical and other statements according to law provisions and the owners' regulations;

b/ Direct supervision, which means the examination and grasping of the situation directly at the enterprises.

Direct supervision of enterprises shall comply with the current regulations on the work of examining enterprises.

Supervisors may employ such consultancy companies as accounting, financial and tax consultancy companies, independent auditing companies, asset valuation companies' to supervise and evaluate enterprises.

3. Pre-operation, operation and post-operation supervision of enterprises:

a/ Pre-operation supervision of enterprises means the examination of the feasibility of their short-term and long-term plans; investment projects; construction, and investment outside the enterprises, capital mobilization schemes and other projects and plans;

b/ Operation supervision of enterprises means the monitoring and examination of the process of implementation of the plans and projects, implementation of law provisions and the owners' regulations by the enterprises;

c/ Post-operation supervision of enterprises means the examination of the enterprises' business results on the basis of their regular reports; the results of their compliance with the owners' decisions or the enterprises' charters; their observance of law provisions.

Article 9.- Rights and obligations of enterprises in the course of supervision

1. Rights of enterprises:

a/ To draw up annual production and business as well as financial plans for use as a basis for supervising and evaluating the results of the management and execution of their operations;

b/ To propose their owners and State management agencies to strictly implement the enterprise supervision regime; to refuse any examinations which are conducted at variance with law provisions;

c/ To make recommendations or lodge complaints to the supervising agencies about their supervision and evaluation conclusions as well as solutions if deeming that they are inappropriate and would affect the evaluation results or operation of the enterprises;

d/ To propose the State management agencies and agencies in charge of formulating policies and regimes to supplement, amend and perfect policies and laws on enterprises to make them suitable to realities, to create conditions for enterprises to develop, improve their managerial quality and operational efficiency;

e/ To hire accounting and/or financial consultancy or independent auditing service organizations to perform the self-supervision function;

f/ To exercise other rights as prescribed by law.

2. Obligations of enterprises

a/ To explain their operating process; financial management and observance of the State's policies and laws; to supply to their owners and State management agencies truthful, complete and timely financial and economic information, plan norms, send regular and irregular reports to these agencies in service of their supervision. To create all favorable conditions for the supervision by their owners and/or State management agencies.

b/ To abide by the requests and final supervision conclusions of the owners or State management agencies and report on the implementation thereof;

c/ To fulfil other obligations as prescribed by law.

Article 10.- Owner's tasks and powers in supervisory activities

1. The owner's tasks and powers towards State companies and State-run one-member limited liability companies:

a/ To conduct close and regular supervision of every enterprise under their management in order to detect in time the enterprises' problems and difficulties, then direct them to find out solutions thereto or find out solutions for the enterprises;

b/ To request the enterprises to submit fully and in time their plans, regular and irregular reports for study, analysis and synthesis in service of the supervision;

c/ To conduct examinations as planned or unexpectedly when necessary. Such examinations shall focus on one or all aspects of the enterprises' operations and strictly comply with the procedures prescribed by law;

d/ To give comments, remarks and conclusions on the supervised contents; to request the enterprises to put forth solutions or apply the solutions recommended in the supervision conclusions;

e/ Annually, to organize the comprehensive analysis and evaluation of the enterprises' operations; concurrently to sum up the enterprise evaluation results and report them to the concerned functional State agencies. The Ministry of Finance shall prescribe this reporting regime.

2. Owner's tasks and powers towards other State enterprises as prescribed by the Law on State enterprises:

The enterprises' owners shall exercise their rights and perform their obligations according to law provisions and the enterprises' charters in accordance with the provisions of this Regulation.

Article 11.- Tasks and powers of State management agencies in supervisory activities

1. To receive reports and opinions of enterprises on the policies and laws on enterprises; to conduct surveys and evaluations of the impact of the State's policies and laws on enterprises.

2. To supervise enterprises according to their functions and tasks, guide enterprises to understand and well implement the State's policies and laws.

3. To request enterprises to remedy in time their weaknesses and problems and to strictly implement the State's policies and laws.

4. To adopt the supervision results so as to amend, supplement or promulgate policies and regimes towards enterprises or submit them to competent agencies for promulgation.

5. To sum up, and report to the Prime Minister on, the implementation as well as impact of the State's policies and laws on the enterprises' operations.

6. To keep confidential the enterprises' information according to law provisions.

III. EVALUATION OF THE OPERATIONAL EFFICIENCY OF ENTERPRISES

Article 12.- The system of criteria for evaluating the operational efficiency of enterprises

1. The evaluation of the operational efficiency of enterprises shall be based on the following criteria:

a/ Turnover and other incomes. For enterprises which manufacture key products for the economy, namely electricity, coal, oil and gas, and cement, the criterion of the product volume consumed in the period shall be applied;

b/ Earned profits and the ratio between earned profits and State capital;

c/ Overdue liabilities and the capability to pay due liabilities;

d/ The observance of regimes, policies and laws regarding taxes and budget remittances, credit, insurance, environmental protection, labor, wages, financial, accounting and auditing regimes, financial reporting and other reporting regimes;

e/ The situation of supply of public-utility products or provision of public-utility services.

2. The criteria specified in Clause 1 of this Article shall be determined and calculated on the basis of data contained in the periodical financial statements and statistical reports according to current regulations. Criteria a, b, d and e, when being taken into calculation, shall be considered to exclude those factors affecting them, including:

a/ Force majeure events;

b/ Investments to expand and develop production, which affects the enterprises' profits in the first two years as from the year the investment projects are commissioned;

c/ The price adjustment by the State (for products with prices set by the State), which affect the enterprises' turnover.

Article 13.- Evaluation methods

1. Criterion 1: Turnover and other incomes compared with the previous year in each sector are as follows:

a/ Agriculture, forestry, fisheries, mining industry (excluding the exploitation of oil and gas), mechanical industry (manufacture of metal products, manufacture of machinery and equipment):

Increase by 5% or more: To be ranked class A;

Increase or decrease by under 5%: To be ranked class B;

Decrease by 5% or more: To be ranked class C.

b/ The processing, electricity generation and distribution, gas, clean water, construction, oil and gas exploitation industries, transportation, warehousing, information and communication, trading, tourist, hotels and other services:

Increase by 7% or more: To be ranked class A;

Increase by under 7%, decrease by under 3%: To be ranked class B;

Decrease by 3% or more: To be ranked class C.

2. Criterion 2: Earned profits and the ratio between earned profits and State capital:

a/ Enterprises making profits and having:

- The ratio between earned profits and State capital increases over the previous year: To be ranked class A;

- The ratio between earned profits and State capital is equal to or lower than that of the previous year: To be ranked class B;

b/ Enterprises operating at a loss: To be ranked class C;

c/ For enterprises operating at planned losses, the Ministry of Finance shall issue a separate guidance.

3. Criterion 3: Overdue liabilities and capability to pay due liabilities:

a/ Enterprises having no overdue liabilities and a coefficient of the capability to pay due liabilities exceeding 1: To be ranked class A;

b/ Enterprises having no overdue liabilities and a coefficient of the capability to pay due liabilities of between 0.5 and 1: To be ranked class B;

c/ Enterprises having no overdue liabilities and a coefficient of the capability to pay due liabilities of under 0.5: To be ranked class C;

An enterprise's coefficient of the capability to pay due liabilities is its current payment capability determined as the total value of its current assets and short-term investments over the total value of its short-term liabilities, including due long-term liabilities.

4. Criterion 4: Observance of current law provisions

a/ Enterprises committing no violations of current law provisions: To be ranked class A;

b/ Enterprises committing violations of current law provisions as already concluded by competent agencies but not seriously enough to be administratively sanctioned: To be ranked class B;

c/ Enterprises having been sanctioned for administrative violations in the observance of current law provisions or their managers or executives, while performing the enterprises' tasks, having committed law violation acts so seriously to be examined for penal liability therefor: To be ranked class C.

5. Criterion 5: Situation of the supply of public-utility products or provision of public-utility services:

a/ Topping the set outputs of products or volumes of services of prescribed quality standards: To be ranked class A;

b/ Achieving the set outputs of products or volumes of services of prescribed quality standards: To be ranked class B;

c/ Underachieving the set outputs of products or volumes of services or the products or services of substandard quality: To be ranked class C.

Article 14.- Ranking of enterprises

1. For business enterprises, on the basis of the result of classification according to each of criteria 1, 2, 3 and 4 specified in Article 13 of this Regulation, they shall be ranked class A, B or C as follows:

a/ Class-A enterprises are those having none of their criteria being of class C, of which criterion 2 and criterion 4 being of class A;

b/ Class-C enterprises are those with criterion 2 being of class C or the other three criteria being of class C;

c/ Class-B enterprises are the rest which are ranked neither class A nor class C.

2. For enterprises which have been set up and actually operate in a regular and stable manner and provide mainly public-utility products or services, on the basis of the results of classification according to each of criteria 3, 4 and 5 specified in Article 13 of this Regulation, they shall be ranked class A, B or C as follows:

a/ Class-A enterprises are those having none of the criteria being of class C and criterion 5 being of class A;

b/ Class-C enterprises are those having criterion 5 being of class C or criterion 5 being of class B while criteria 3 and 4 being of class C;

c/ Class-B enterprises are the rest which are ranked neither class A nor class C.

3. For State corporations, on the basis of the classification of results of their member enterprises, they shall be classified as follows:

a/ Class-A corporations are those with their class-A member enterprises accounting for over 50% of the aggregate turnovers of the corporations;

b/ Class-C corporations are those with their class-C member enterprises accounting for over 50% of the aggregate turnovers of the corporations;

c/ Class-B corporations are the remaining corporations.

Article 15.- Guidance for, and publicization of, the classification of State enterprises

1. The Ministry of Finance shall assume the prime responsibility for guiding concretely the methods and conditions for calculating the criteria specified in Article 13 of this Regulation.

The ministries, central agencies and provincial/municipal People's Committees shall classify enterprises under their respective management according to different economic sectors for application of criterion 1 specified in Article 13 of this Regulation.

2. Basing themselves on the provisions of this Regulation and guiding documents of the ministries, agencies and organizations, annually, the enterprises shall make self-evaluation and self-classification; report such to the agencies stated in Clause 3 of this Article for assessment and publicization of the results of classification of the enterprises. These reports shall be sent together with the enterprises' annual financial statements according to current regulations.

3. In the second quarter of the subsequent year, the ministries, central agencies and provincial/municipal People's Committees as well as the managing boards of State corporations and parent companies shall assess and publicize the previous year's results of classification of the enterprises under their management. The classification of State corporations or parent companies shall be publicized after consulting the Ministry of Finance.

4. The agencies and organizations specified in Clause 3 of this Article shall report on the results of classification of enterprises to the Ministry of Finance for summing up and reporting to the Prime Minister.

Article 16.- Commendation and disciplining

On the basis of the results of classification of enterprises, the commendation and disciplining shall be effected as follows:

1. For class-A and class-B enterprises, their managing or executive boards shall be commended and rewarded according to their business results as follows:

a/ For State companies:

- The ministries, central agencies and provincial/municipal People's Committees shall decide on the reward levels for the managing boards of corporations, independent State companies and the directors of attached independent State companies having no managing board.

- The managing boards of corporations and independent State companies shall decide on the reward levels for the general directors or directors, deputy general directors or deputy directors and chief accountants of their corporations or independent State corporations; the directors of independent State companies having no managing board shall decide on the reward levels for deputy directors and chief accountants of their companies.

- The general directors of corporations shall decide on the reward levels for directors and chief accountants of their member enterprises.

- Reward money shall be deducted by the managing or executive boards of the enterprises from their reward funds.

For corporations generating no profits because they do not directly do business or do business but lack sources, the reward money shall be deducted by their managing or executive boards from the superior management funds contributed by their member enterprises.

b/ For State-run one-member limited liability companies:

The owners' representatives shall decide on the reward levels for the managing boards or presidents of the companies.

The managing boards or presidents of the companies shall decide on the reward levels for the directors, deputy directors and chief accountants of the companies.

The reward money shall be deducted from the enterprises' reward funds.

c/ For enterprises ranked class A for two consecutive years, the chairmen of their managing boards and their general directors or directors shall be considered and conferred by competent agencies the "Good Manager" title and considered for wage rise ahead of time.

2. For enterprises ranked class C, their managing or executive boards shall not be rewarded.

For enterprises ranked class C for two consecutive years, basing on the actual situation of these enterprises, competent agencies shall rearrange the posts of Managing Board chairman and general director or director of these enterprises; consolidate, reorganize and rearrange the enterprises according to regulations.

3. For other State enterprises:

Their owners shall apply the provisions of Article 15 to rewarding and punishing the managing boards and boards of directors of these enterprises.

IV. ORGANIZATION OF IMPLEMENTATION

Article 17.- Implementation organization responsibilities

1. The Ministry of Finance shall assume the prime responsibility, together with other ministries and agencies in charge of various econo-technical branches, for guiding and examining the implementation of this Regulation.

The Ministry of Finance shall assume the prime responsibility, together with the concerned ministries and agencies, for issuing a separate guidance on the criteria for evaluating the operational efficiency of, and classifying, enterprises operating in the banking, insurance and financial domains.

2. The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies, the presidents of the provincial/municipal People's Committees, organizations assigned to act as representatives of the owners of State enterprises, the chairmen of the managing boards, the general directors or directors of State enterprises shall have to implement this Regulation.

Prime Minister
PHAN VAN KHAI